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Coca-Cola: Stock of the Week

Coke does Christmas well, but it’s much more than that now.

Andrew Willis 19 December, 2022 | 4:28AM
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Andrew Willis: Did you know it was Coca-Cola (KO) that solidified Santa’s jolly modern-day depiction in a marketing campaign? Hopefully, that “Classic” association will help with sales of the arguably non-essential soft drink as inflation tightens household budgets. Or maybe the company doesn’t need a holiday pick-me-up in sales.

Coke has a new flavour these days. For one, carbonated drinks aren’t as big of a business anymore, with the company’s non-sparkling category growing to nearly a third of volumes in 2021 as the company bulks up on fitness drinks and coffee for cold winter days.

Senior equity analyst Dan Su expects the company to continue with the same marketing innovation that saw Santa evolve from Ol’ Saint Nick. We expect continued product innovation and recipe reformulation at Coke to appeal to new consumers, including “better for you” products with natural ingredients. And even if inflation hits spending across the board in North America, expansion in emerging markets should help blunt the impact.

In markets like Asia-Pacific and Latin America, Coke has a long way to go in year-round consumption of carbonated beverages to get anywhere near North American levels. According to company disclosure, per capita spending is around 93 U.S. dollars, whereas in North America our soda spend is a staggering 712 dollars.

From geographic expansion to product innovation, we think Coke is well-positioned to navigate an uncertain economic landscape. And the company’s stock price might not need the help either as it currently trades around or above our fair value estimate – meaning investors might want to wait until after boxing day to buy this festive bet.

For Morningstar, I’m Andrew Willis

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Coca-Cola Co60.49 USD0.00Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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